During a portfolio review, which of the following is a valid reason to REPLACE an existing mutual fund scheme?
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EXPLANATION
Valid reasons to replace a fund include: persistent long-term underperformance vs benchmark and peers, fundamental change in fund mandate or strategy, change in fund manager with resulting strategy shift, or a change in the investor's own goals or risk profile. Short-term NAV dips are not valid reasons to exit.
An NRI investor in the 60% income tax bracket in their country of residence asks for a tax-efficient Indian mutual fund investment. Which factor is MOST important to address first?
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EXPLANATION
For NRI investors, tax optimisation requires understanding India's TDS regime on mutual funds AND the tax treatment in the NRI's country of residence, including any Double Taxation Avoidance Agreement (DTAA) provisions. Fund selection comes after this tax framework is understood — recommending ELSS or any scheme without this analysis is premature.
Which of the following would typically indicate a CONSERVATIVE risk profile?
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EXPLANATION
A 62-year-old retiree with fixed income and no liabilities typifies a conservative profile — the investment horizon is shorter, capital preservation is more important than growth, and there is limited ability to recover from a large loss. Conservative investors are best served by debt-oriented or hybrid conservative funds.
An investor holds five large-cap equity funds from different AMCs. Is this portfolio well-diversified?
A.No — multiple large-cap funds from different AMCs will largely hold the same top 100 stocks, creating high overlap with minimal additional diversification
B.Yes — holding funds from five different AMCs guarantees diversification
C.Yes — the different fund managers will make different stock choices, ensuring full diversification
D.No — investors should hold a maximum of two funds from any single category
What is 'sequence of returns risk' in the context of retirement planning?
A.The risk that SIP instalments are processed in the wrong order by the RTA
B.The risk that equity markets deliver negative returns in consecutive years
C.The risk of selecting funds in the wrong sequence during portfolio construction
D.The risk that poor investment returns early in retirement, combined with withdrawals, can permanently deplete the corpus even if long-term average returns are adequate